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Building the leading internet eco-system
Mail.ru Group
1. We are excited by the local Internet market opportunity:
a) Largest internet market in Europe, with ~147mn people living in Russia and >75% Internet penetration
for those aged 16+
b) Cheapest data globally: with Russia ranked 4th cheapest globally for mobile data, at RUB37.9/Gb vs
RUB195.5 global avg and with Russia being cheapest globally in terms of pricing of unlimited data at
RUB613 vs RUB2791.8 global average
c) Room for advertising growth: Despite mild 2.3% GDP growth in 2018, overall advertising market
expanded by 12% as remains underpenetrated, at 0.5% share of GDP vs 1% in the US or 0.6% in China
and with $21 in spend per capita vs $233 in the US or $37 in China
d) Ongoing shift to digital advertising: with Internet having surpassed TV for the first time in 2018 in
terms of share in advertising wallet (RUB203bn vs RUB187bn) with 43% share of online. Furthermore,
social networks have been gaining share vs other digital channels as reflected by MRG’s 38%
advertising growth in 2018 vs 22% growth for the market. MRG accounts for ~16% of advertising
wallet, which means further growth potential compared with ~20% share of FB in the US
2. We are the largest domestic Internet company in terms of reach at 95% local Internet audience coverage
monthly given our 100% ownership of #1/#2 local social networks, #1 mapping service, portal etc
Executive Summary:
Source: Internal data, Content review, Mediascope data around Internet reach2
610
1521
3133
36
42
56
71
86-88
0
10
20
30
40
50
60
70
80
90
100
2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017 A 2018A 2019 guidance
10 year CAGR ~30%
Mail has grown revenues 10x over 10 years
Source: Internal data. Guidance is provided on ex ESF, ex Pandao and ex DC basis (management accounts, pro-forma and hence demonstrates purely organic growth) 3
Advertising market – room for further market share gains for MRG
Source: Internal data, e.Marketer
13% 13% 14% 13% 14% 14%16%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2012 2013 2014 2015 2016 2017 2018
MRG’s advertising revenue growth vs the market and trend in online ad share
MRG's ad growth, % Online ad market growth, % MRG's market share, %
As a comparison,
Facebook held 19.6%
US digital ad market in
2018, up from 17.1% in
2016. Google’s share
declined from 40.8% to
37.2% during the period
MRG has been growing its advertising revenues faster than overall market, having gained 3p.p of market share since
2015. We believe in further shift in advertising budgets from offline to online as well as from other channels to social
within online, and hence see further room for market share gains for MRG from current ~16% of digital market
4
We are the largest Russian Internet company by reach
Source: Mediascope. Total = Web Desktop, Web Mobile, App Online, App Offline. Data as of May 2019
MRG boosted monthly reach by 1.1p.p. YoY in May, with a 0.3p.p gain in daily reach
MRG reaches 95% of domestic Internet users monthly with a broader gap with competition in terms of daily reach, where we are at >71%
94,90 94,7091,50
87,80
53,20
MRG Google Yandex Facebook Rambler&Co
MAU share (Total)
May`18 May`19
71,10
61,80
54,80
61,00
10,80
MRG Google Yandex Facebook Rambler&Co
DAU share (Total)
May`18 May`19
5
1998-2001
Email and portal
launched
#1 E-mail service
in RU
Ahead of Gmail
in Russia
2007 2008 2016-now
Expanded into
gaming & now also
eSportsMain
milestones
Current
status
#1 PC game in RU
Successful mobile
games developer
... and many other leading titles
Expanded into
social
#1 social network in RU
#2 social network in RU
Ahead of Facebook,
Instagram and Twitter in
Russia
Communication Social Gaming & eSports E-commerce
Expanded into O2O
and e-commerce
#1 restaurant food delivery
service in RU (developing in
partnership with Sberbank)
Leading mobile classified in
RU (100% owned by MRG)
Fastest growing ride-hailing
service in RU (developing
in partnership with
Sberbank)
Emerging cross-border e-
commerce player (developing
in partnership with Alibaba,
MegaFon & RDIF)
MRG started from email & portal but has now become a leading social, gaming, & O2O company in Russia
Source: Management estimates, public sources including Mediascope data for 0+ for web for OK 6
We diversified into eSports and
made it intl by partnering with
Modern Pick
Social
networks
Food
deliveryClassifieds Search Taxi Online
videoEcomMusic
services Games
Global leader
Local Russian leader
MRG
ecosystem
AliExpress
Russia
Main Internet verticals in Russia are dominated by local players despite global competition
Source: Management estimates, Internal data7
Digital
media
Games &
eSports
E-commerce
Users
AI, Big data
Cloud
Infrastructure
(IT, payments, etc.)
Communications
and social services
Developing in
partnership with Alibaba,
RDIF and Megafon
Digital
media
O2O
Developing a leading O2O
consumer
services platform together
with Sberbank
Ad tech
Other
MRG is building an eco-system powered by ~100M users and developing partnerships to strengthen across verticals and lead digital transformation of Russia
Source: Internal data8
eSports
Developing a leading global
eSports and non-violent
games company in
partnership with Modern
Pick
Solid M&A track record
Yes, we have done a number of M&A in recent history, but with solid execution post deal closure in terms of consistently del ivered elevated revenue growth
Source: Internal data9
Q1-14 Q4-18 Q2-15 Q4-18 Q2-15 Q4-18
VK Pixonic Delivery Club
Q2-16 Q4-18
Bit.Games
Q2-15 Q4-18
Geek Brains
Revenue growth post acquisit ion
oCPM(launched in 2018) Focus initiatives
Results for MRG
• Amounted to ~9% of total ad sales through
MyTarget in June, up from 1.6% in June 2018
• Technological improvements resulted in avg
CPM improvement in June for both, OK and
VK
Benchmark
Plans • Introduce for events – broaden sale across all
categories / types of clients
• Facebook ads delivery and bidding optimization
has proven to work well across a wide range of
audiences and industries
• Facebook’s revenue growth is driven mainly by
ARPU: DAU in 2018 grew 10% YoY, whereas
ad revenue surged 38%
Contextual targeting(launched in 2018)
• Done based on search queries on MRG
platforms (Youla, VK, OK, etc), desktop+in-app
• Clients can edit lists, there is retargeting data
expiry now with target reach measurement)
• Amounted to >4.5% of ad revenues in MyTarget
in June, up from 2% in June 2018, with growth
accelerating further in July post major platform
update
• Add new data sources, further improve targeting
through enhancement of underlying advertising
technology
• Context advertising has set Amazon’s ad business
on a path to rapid growth: from $3bn in 2016 to
~$10bn in 2018
• According to eMarketer, Amazon is now the #3
digital ad platform in the US with a market share
expected to grow from 4.1% in 2018 up to 7.0% in
2020
Advertising – additional upside: new models
Source: Internal data, Peer reports, looking at MyTarget data only on and based on July 1 2019 data. Adjusted for own platform marketing 10
SME targeting Focus initiatives
Results for MRG
• Number of clients with <RUB50k budgets in
MyTarget grew by >50% YoY in June
• CPM continues to improve, with hyperlocal
targeting ad share at >6% of advertising sales
in MyTarget in June, up from 4.3% in June
2018
Benchmark
Plans
• Facebook has ~5m advertisers, the majority of
which are small and medium sized businesses,
VK has ~110k advertisers
Performance retail
• Our focus remains on moving offline retail trade-
marketing budgets to online
• We are expanding partnerships with retailers
around online targeting
• “Cashback” product has been launched when
MRG users (within VK, OK etc) can earn
discounts/bonus points on partner products by
scanning receipts. Involves usage of our QR
code tech
• Work on promoting demand for given technology
• Broader rollout of direct cashbacks in VK and OK
• Total trade-marketing capacity stood at
RUB500bn in 2018. Even small share of this
market may bring billions of additional revenue
to MRG
• Adding new data sources = further improving
targeting through better advertising technology
• Continued focus on broadening SME
advertiser base
Advertising – additional upside: new initiatives
Source: Internal data, Peer reports, based on MyTarget statistics11
MRG Advertising network
<15%
2x
Share of network revenue in total advertising revenue in June
Ad network revenue increase YoY in 2018
+50%Increase in the number of ad network’s partners YoY in 1H19
(desktop+mobile), with significant room for additional upside
• In 2H19 we plan to further improve quality of traffic on partner websites, with benchmarking vs
global standards in terms of viewability, anti-fraud, etc, which is expected to further support
related revenues
• Yandex Ad Network and Google Network account for ~23% and ~17% respectively, which
provides for further growth potential
Advertising network development in focus
Source: Internal data, based on MyTarget statistics, peer reports from 201812
Advertising strategy - focus on building omnichannel reach tools
Customer
Smart TV
Addressable TV
Smartphone &
Desktop
OOH
Offline Retail
Voice
Assistant
Online Radio
Source: Internal data13
2006 2009
VK is focused on ongoing development of new functionality,
which will be actively used by its major and already highly engaged audience
VK Launch
2007 2008 2010-11
Audio & Video
platforms
Blogging platform,
Newsfeed,
Mobile Apps
Ads Platform,
Games platform,
International version
Apps Platform,
Gifts
2012-13 2017
Ad Exchange,
Platform for Groups
2014-15 2016 2018
Stickers,
Marketplace
in Groups
Voice/ Video Calls,
VK Pay
VK Mini Apps
Platform
VK Music,
Discover
Section,
Ads Network
Smart feed with Ads,
Stories,
VK Live,
Money transfers
VK – the largest communication platform in Russia and CIS
Source: Internal data14
Source: Internal data
4 321
6 232
8 937
12 676
18 431
2014 2015 2016 2017 2018
VK revenue, M RUB
VK – growth continues
Source: Internal data. For 2014, 2015 and 2016 revenue is presented under IAS 18 standard, for 2017 and 2018 - under IFRS 15.
VK revenue grew 4x over a 4-year period
We expect to double VK revenue over the
next 3-4 years4хover 4 years
15
+59% Stories Viewed
Q2’19, YoY
+54% Comments Posted
(on iOS and Android)
+51% Video Viewed
+53% Messages Delivered
User engagement growth increases total time spent
VK / User engagement growth
Source: Internal data16
Source: Internal data
1,6
5,7
9,9
19,9
Stories, #B views Video, #B views
VK is actively developing video products: stories and video have grown – 4x and 2x respectively
Source: Internal data17
Multiple initiatives around live streams and video
18
• VK launched public tests of the updated video
section on iOS and Android. Users can now benefit
from personalized recommendations, collections of
popular videos and other new features
• Updated mobile live streaming service now allows
to add links to products, polls and posts, which
viewers can open while watching.
• Live streamers can use these links to promote
products and services more effectively while
making their streams more interactive
Source: Internal data
22M+37% YoY
Number of monthly unique users
communicating with communities 1.7B2.6x YoY
Number of messages sent to
communities monthly
VK users are highly engaged with communities
Source: Internal data, June 2019
• VK continues to improve usability around communities. It now offers an activity log, which lists activities
that might be interesting to community managers (post deletion, request approvals or setting changes)
• VK launched a new community menu: managers can choose a name and upload a cover photo for
each link they add to the menu. Links can be set up to provide quick access to important content:
discounted products, payment post, delivery terms etc.
19
1,21,4
1,7
1,92,0 2,1
2,5
Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 July
Music – expansion continues
Music subscriptions and trials* grew ~2x YoY
* Based on aggregate numbers of VK, OK, UMA and excludes inactivated telco bundles20
21
• Content platform
Further development of content
recommendations, stories and music products
• VK Mini Apps
Launch of further products and services
natively embedded into VK mobile app and
desktop, base for ecommerce
• Social commerce and SMEs
Development of shopping center, product
distribution, integration with groups and
payment products
VK strategy – key focus areas
21
In OK people are showing their real life with real emotions
x3.9In presents sent YoY as
of 2Q19 (to 9.9bn),
up from 2x growth
seen as of 1Q19
OK users mostly communicate with close relatives/friends and actively express emotions using unique
variety of services: presents, stickers, postcards, marks, reactions and others. Growth across all the key
engagement matrix has accelerated as of 2Q19, which marks overall strength in engagement of OK
x23In stickers sent YoY as
of 2Q19 (to 356.8mn),
which marked an
acceleration from 14x
seen in 1Q19
x3.7In postcards sent YoY as
of 2Q19 (to 422.8mn),
also up from 2x growth
seen as of 1Q
OK — unique social and entertainment platform
Presents Stickers Reactions
Source: Internal data22
Games – growth continues
• OK made RUB200mn payout to developers of
mobile games in the first 5 months of 2019
• OK saw x2.25 YoY increase in audience playing
mobile games
• OK saw 2.5x in payout to developers with ad
monetization
• Overall, >40% of OK DAU plays games, with >25%
of OK revenues coming from related monetization
Growth in payout
to mobile games
developers in 5
months
Source: Internal data23
• OK offers ”Creative studio”, a platform for all video content
creators, which supports interactive mechanics (e.g. polls,
quizzes, clickable descriptions and texts), which can be
added to the video content
• There is an updated video storefront with anonymous
access and search options
• OK offers a smart Videos Feed in mobile apps with an
auto-play feature, which allows to view video playlists either
AI-generated or related to certain Channels or Groups
results +10% views
• In May OK Video was ranked as the 1st for video
content quantity in RuNet by Brand Analytics
• OK has ~870mn daily video views daily and 130mn
streams, being the largest local video platform on the
Russian market.
OK video – major growth area
Source: Internal data, Brand Analytics (independent research)24
Emotions exchange Video platform Games
Community development for
game, acquisition of new mobile
games
Continue to boost user
engagement with new tools, fast
feedback, paywall reduction
New video smart technologies and showcase,
“Creative studio” for video creators and professionals,
first digital TV
OK strategy – key focus areas
Source: Internal data25
• Global games market is 80x+ times bigger than
Russian and hence focus of MRG is to develop
new and adopt existing titles for global
audience
• Target is to draw 80% of gaming revenues
from abroad by the end of 2022
• Target is to double reported EBITDA
within 4 years
Source: NewZoo - 2018 review report
$137.9BGlobal
games market$1.7B
Russian
games market
Games - focused on global expansion
26
• MRG international gaming revenue in Q2 2019 reached 69% of total MRG
gaming revenue and >20% of MRG total group revenue
• USA, Germany and Japan are our largest non-Russian markets
• Largest intl expansion opportunity remains in Asia, especially China
• Top titles include: War Robots (m), Hustle Castle (m), Warface (PC/c), Left to Survive
(m), Tacticool (m), Pathfinder Kingmaker (PC), Perfect World (PC)
MRG gaming revenue, USD M
International gaming revenue increased 1.3x YoY in 2Q
Source: Internal data. M = mobile, C = console. Adjusted impact from Panzerdog and Swag Masha
6 6 10 12 11 13 13
23 2734
4551 53 54 57
67 6673
38 36 3743
3538 37
6168 67
75
89 9086 87
107
97
106
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
Internatiaonal revenue Local revenue27
28Source: Internal dataSource: Internal data
28
29Source: Internal dataSource: Internal data
29
30Source: Internal data
31Source: Internal data
Cohort cumulative revenue
Hustle castle case study – turning investments into EBITDA
Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20
Revenue Revenue forecast
Total operating expenses Total operating expenses forecast
Revenue cohorts
• Reaching marketing break-even in 4 months of
cohorts living in the game
• 12m revenue ~ 1.5x marketing investments
Potential
• 20% margin during the 2nd year of operation
• Forecasted growth of EBITDA in future periods due to dramatic
revenue growth and accumulation of loyal core audience
• Opportunity to grow EBITDA in the moment with help of marketing
optimization
EBITDA
EBITDApotential
Break-even
Source: Internal data and estimates32
E S f o r c e - # 1 e S p o r t s C o i n R u s s i a / C I S – g o i n g i n t l
• Virtus.pro (the most established esports teams across CIS)
One of the oldest eSports teams (founded in 2003)
The leading Dota 2 roster in the world (consistently in top-10), with
Promising Counter-Strike: Global Offensive roster
~$0.7mn in prize money YTD, top-10 globally. 110mn audience reach annually, 400+
prizes
• Cybersport.ru (largest themed news website in Russia/CIS)
News portal focused on eSports in Russia/CIS
>100k in DAU, 1.5mn MAU, 15k player base
• RUHUB (largest content creation studio in Russia/CIS)
Broadcasting and video production studio, with 114mn users, 11 websites, 50 channels
and >130 social networking groups, with >2mn subscribers
10 000+ hours of streams/year. Top-10 in views globally on Twitch in 1H19
260m unique views on YouTube
• Epicenter (organizer of largest esports tournaments across Russia/CIS)
Organizer of tournaments incl Majors in Moscow and St Petersburg featuring the world’s
strongest esports teams. Epicenter XL was the most viewed commmerical Dota 2
tournament of 2018*
• Yota Arena (major eSports tournament venue)
~5,000 sqm, 116 seats in game zone, >1000 in audience capacity
Source: internal data. * According to independent analytical esports platform esc.watch
ESF eco-system covers >85% or eSports audience across CIS. It offers:
Partnership with Modern Pick allows to scale ESF internationally, with focus on Europe and
non-violence game genres and allows for broader synergies with our Games business
33
M o d e r n P i c k p a r t n e r s h i p e x p a n d s o u r e S p o r t s r e a c h
34
• Having 20% share of the European market would mean being 2.75x bigger
than the whole Russian market
• Markets like North America and Europe generated 80% of premium games
revenue in 2018 (incl $7bn for Europe), where access to AAA-focused
company like Modern Pick helps
Russian games market
$1.7bn
European games market
(ex Russia)
$23.4bn↑14x
610 M - population
504 M - Internet users
292 M - game players
70 M - eSports audience
Source: NewZoo, 2018 report, SuperData, 2018 report
148 M - population
113 M - Internet users
66 M - game players
22 M - eSports audience
Overall, expansion to the European eSports and gaming market – offers a broad range of growth
opportunities. European market (ex Russia/CIS) is 14x bigger (in $) and has 4.4x more players
These are high growth and high frequency businesses with a potential to achieve a high margin
Largest Russian online food
delivery business
Delivery Club's revenue growth accelerated to
above 100% in 2019 and business remains on
track to double in 2019. MRG contributed
100% stake in DC to JV with Sberbank where
we hold 50%
433
865
2Q18 2Q19
Revenue (RUB m)
Leading mobile
location based marketplace
Youla became market leader in mobile
classifieds just 3 years since foundation with
+93% MAU growth since Jan 2017
14
27
beginning of 2017 March 2019
MAU: web + app (m)
Youla
Fast-growing
ride-hailing service
Number of quarterly rides (m)
2,3
11,9
2Q18 2Q19
CM's # of rides has grown 16x times in 2018
becoming No2 player in Moscow. Quarterly ride
growth remains solid YTD with CM embarking
on regional expansion. MRG’s stake is being
contributed to O2O partnership with Sberbank
Citymobil
MRG is developing a market leading O2O services platform, including via partnership with Sberbank
Source: Internal data35
• DC is a leading Russian restaurant food delivery company, which was acquired by
MRG at the end of 2016 and now part of O2O partnership with Sberbank
• Own delivery was launched in early 2016. Now offered in 18 cities and accounting
for >40% of orders, up 4.2x YoY in 2Q. Courier fleet is to be used for last mile
delivery of e-commerce verticals in the future
• In 2018 DC signed partnerships with 3 major QSRs: McDonald’s, KFC and BK
• DC works with >10,500 restaurants in 120+ cities
• Partnership with Sberbank provides O2O business incl DC with up to $800mn in
additional development capital, with post-money valuation of up to $1.7bn
DC continues to deliver ~100% YoY revenue growth
YoY growth,%
DC holds partnerships with top-3 QSR chains in Russia
Delivery Club Russia’s Food delivery leader
Source: Internal data
39%
20%
37%
71%
108% 100%
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-1936
• In 2018 the Co received investments from MRG in exchange for
a minority stake
• Within 6 months it became #2 player in the most competitive
Moscow market with the help of MRG’s strong marketing support
and expertise, access to MRG Big Data, assistance from internal
AI/ML team and other proprietary technologies
• Reached >20% share of Moscow market by December 2018 vs
14% as of 1H 2018
• Rides grew 5x YoY as of 2Q19, following 16x increase in 2018
• Entered Smara, Tolliatti in 1H with broader regional rollout planned
for 2H19
• Stake in Citymobil is being transferred to the O2O JV with Sberbank
in order to maximize growth and regional expansion as well as
extract maximum synergies from food delivery given the
combination with DC. MRG holds 50% stake in the JV
Citymobil – part of O2O partnership with Sberbank
Source: Company internal data, Transportation Department of Moscow statistics37
38
Competitive landscapeComparison with the closest competitor
(the World’s #2 most visited classified(1))
Focus on
one vertical
Online
Offline
Real Estate:
Auto:
HR:
Multi-vertical
platformOnline
Sources: 1) 2018 Classified Intelligence Report by AIM Group
2) Mediascope, cities with population of 700k+ and 100k+; average over Q1’19
3) Youla analysis as of 2Q’19 based App stores ratings
YoulaLeading multi-vertical online-classified business
1,5
2,5
1,4
2,8
700k+ cities 100k+ cities
App DAU(2)
mln users
4,6
8,4
5,4
10,8
700k+ cities 100k+ cities
App MAU(2)
mln users
AppStore app rating(3) 4.8 3.7
GooglePlay app rating(3) 4.7 4.5
Youla Avito
YoulaExploiting advantages of the horizontal model
Source: Internal data
Note: Initiatives also include features under development 39
• Launched at the end of 2015, Youla reached 27m users in MAU by Mar’19
• First monetization tests started at the end of 2017 and in 2018 revenue surpassed RUB 1bn with
a target to reach around RUB 2bn in revenues in 2019
• Q1 2019 revenue was up 2.7x Y-o-Y to RUB 384m. Growth continued in Q2 2019 with revenue
reaching RUB 455mn (+1.9х Y-o-Y)
~2x growth
over 2 years
Mar’19 MAU
27m users
YoulaRapidly growing classified in Russia
Source: Internal data. Estimation of EBITDA margin potential is based on average margin for global peers
RUB 1bn+
in Revenue over the 1st year
of monetization or
just 3 years after launch
50%+
EBITDA margin potential
with high conversion to FCF
40
Mail.ru – email service
• #1 email service in Russia, with ~27mn MAU (Desktop + Mobile, April) vs ~19mn for Gmail or ~17mn for Yandex Mail.
DAU was +7% YoY in April to 12.2mn incl +39% for mobile (to 6.54mn)
• ~103M active accounts
Strategy centered around key modern user requirements:
• Transactional messages categorization + pay button
inside the message + order grouping by order ID
• More value-added services incl C2C money transfers,
mobile top ups, payment of fines/gas debt, behavior
based recommendations around subscriptions, smart
cards for emails with event information with options to
add to calendar or search for address. Testing “call a
taxi” option
• Rising focus on data privacy and efficient access
through ongoing shift away from passwords towards
rotating sms login (launched as optional across 20% of
users), enabled security checkup for all web users
• Completely redesigned Android and IOS applications
as of the end of 1H
• Updated “Octavius” web interface to match new “while
& clean” app style
Source: Internal data. MAU data from Mediascope.41
Cloud solutions for business Emerging player building cloud infrastructure and data storage as
well as Big Data as a service, Backup as a service and GPU-based
computing in the cloud for RU market
Predictive analytics solutions for
businessSophisticated predictive models, recommendations systems,
segmentation and personalization tools based on MRG Big Data
and proprietary technologies
TARANTOOL
Data base management solutionProprietary in-memory Data Base management solution with
performance benchmarks* beating global analogs. Originally
developed for internal MRG needs (used in 60%+ MRG products)
Face and objects recognition
solutionTechnology focused on recognition of any objects, faces, scenes
within photo/video stream using AI and ML as well as documents
stream recognition
Source: internal data * Based on performance-tests and benchmarks available in public access
Big Data and ML Leading solutions implemented within MRG as well as accessible for 3rd parties
42
MCS - International recognition achieved
• MCS became a certified member of Cloud Native
Computing Foundation (CNCF) and is now the only
Russian holder of Certified Kubernetes – Hosted
certification
• Expanded the range of PaaS services
• Entered the Enterprise market of storage for business
analytics and log management
43Source: internal data
44
• We are putting more resources behind our initiatives in new technologies especially in areas of AI, speech and visual recognition, including implementation of those for voice powered features and products
• For this we created MRG Tech Lab, which includes teams from various units inside the Group.
• This year we don’t expect these projects to have any material revenues and MRG Tech Lab will have a cost of between RUB1-1.5bn (included into FY 2019 EBITDA guidance)
• First major results of MRG Tech Lab was the launch of Marusia virtual voice Assistant (~$2mn development cost)
• During beta test period VA Marusia can search for information (answer questions, show current weather, find movie tickets etc), help with routine tasks (calculate, turn on your music, find tickets or create simple reminders) and socialize with user (make toasts or jokes, make small-talk, play games and entertain kids with fairytales and riddles)
• Marusia is expected to be synergetic with MRG assets. Unique level of access to existing services will provide it with access to the largest content source across Russian web (unique integration with social networks VK & OK (with largest number of paying music subscribers), functional services (ordering food (Delivery Club), mobility services (CityMobil (taxi)) and other features
MRG Tech Lab & Marusia
Source: Internal data
45Source: Internal data, based on economic rights with RDIF call option exercised
AlibabaMegaFon
MRGRDIF
AER JV
47.8%
• Pandao
• Cash investments
• Synergies
with MRG
ecosystem
24.3%
12.9%
15.0%
• Aliexpress Russia
• Cash investments
• MegaFon swaps its 9.97% stake in
MRG for a 24.3% stake in AER JV
N1 e-commerce
business in Russia
AER JV deal creates a strong leader in Russian e-commerce
• Cash investments
All definitive agreements have been signed. Dmitry Sergeev, MRG Deputy CEO, has been nominated as
Co-CEO of AER, which is expected to launch operations in the coming months
• Integrate shopping experience in the social context by involving users into
engaging mechanics
• Promote social shopping as a lifestyle enhancing experience
• Make influencers and communities our partners and give them tools to engage
users in shopping by content creation
• Establish entry points 2-3 clicks from anywhere inside the social networks
• Make user journey as native as possible and minimize friction in the shopping
process
• Use social data, content interaction data, user social graph and ad reaction data
to enrich user profile
• Provide integrations for merchants and cover all businesses on the social platforms
with easy-to-use tools to increase their sales
E-commerce experience to be integrated in the key activities inside social platforms
• Final stage of development and ongoing tests of
AER Mini App within VK platform
Source: Internal data46
Q2 & H1 2019 revenue and profitability update
47
Note 1: Pandao, ESForce and Delivery Club are excluded from all numbers on a pro-forma basis
Note 2: Net profit includes the impairment of Skyforge in the amount of RUB 630M in Q2 2019 and impairment of Armored Warfare in the amount of RUB 1,694m in Q2 2018
Note 3: H1 2019 actual results include one-off VAT charge of RUB 295mn recorded in other operating expenses (above EBITDA) in Q1
Q2 and H1 2019 Revenue and profitability reviewRUB MN Q2 2018
actualQ2 2019
actualY-o-Y
growth, %H1 2018
actualH1 2019
actualY-o-Y
growth, %Revenue 16,313 20,046 22.9% 32,240 39,464 22.4%
Online advertising 6,870 8,417 22.5% 13,359 16,244 21.6%MMO games 5,325 6,858 28.8% 10,445 13,289 27.2%Community IVAS 3,626 3,898 7.5% 7,520 8,099 7.7%Other revenue 491 873 77.7% 916 1,832 100.0%
EBITDA 5,938 7,220 21.6% 11,977 12,747 6.4%EBITDA margin, % 36.4% 36.0% -0.4% 37.1% 32.3% -4.8%
Net profit 1,885 3,240 71.8% 5,350 6,118 14.4%Net profit margin, % 11.6% 16.2% 4.6% 16.6% 15.5% -1.1%
Capex -1,159 -1,326 14.4% -2,605 -3,079 18.2%
% of revenue -7.1% -6.6% 0.5% -8.1% -7.8% 0.3%
Revenue growth accelerated in 2Q, including in Advertising as well as MMO Games
EBITDA margin stood at 36% for the Group in 2Q, showing a marked improvement QoQ
Q2 2019 operating segments performance
48
Note 1: Pandao, ESforce and Delivery Club are excluded from all numbers on a pro-forma basis
Note 2: Total operating expenses include Group corporate expenses allocated to the respective segment
Source: Internal data
Q2 2019 operating segments performance
RUB MMCommunications
and SocialGames New initiatives Eliminations Group
Segment revenue
External revenue 11,598 7,487 960 20,405
Intersegment revenue 58 57 1 (116)
Total segment revenue 11,656 7,544 961 (116) 20,045
Y-o-Y growth 13.0% 33.7% 147.0% 198.9% 22.9%
Total operating expenses* 5,349 6,125 1,467 (165) 12,825
Segment EBITDA 6,307 1,419 (506) 7,220
EBITDA margin 54.1% 18.8% -52.7% 36.0%
Net profit 3,240
Net profitability 16.2%
H1 2019 operating segments performance
49
Note 1: Pandao, ESforce and Delivery Club are excluded from all numbers on a pro-forma basis
Note 2: Total operating expenses include Group corporate expenses allocated to the respective segment
Source: Internal data
H1 2019 operating segments performance
RUB MMCommunications
and SocialGames New initiatives Eliminations Group
Segment revenue
External revenue 23,103 14,427 1,933 39,463
Intersegmental revenue 68 77 1 (146)
Total segment revenue 23,171 14,504 1,934 (146) 39,464
Y-o-Y growth 12.3% 31.9% 172.6% 54.3% 22.4%
Total operating expenses* 10,339 13,333 3,191 (146) 26,716
Segment EBITDA 12,832 1,171 (1,256) 0 12,747
EBITDA margin 55.4% 8.1% -64.9% 32.3%
Net profit 6,117
Net profitability 15.5%
• Mail.ru is the largest internet
business in Russia with c.50% of
Mail.ru GDRs listed
on LSE
• Blue-chip shareholder base
includes Naspers, Tencent and
Alibaba (in process)
28%
7%
10%
5%
50%
Naspers Tencent Alibaba (in process) MF Technologies Free float (LSE)
MRG is backed by leading global internet companies
Source: Public data, including public information around target AER transaction50
MFT Freefloat
Economic 27.6% 10% 7.4% 5.2% 49.8%
Voting 12.2% 4.4% 3.3% 58% 22.1%
MF shares to move to
AliBaba on closing of JVUSM/MF votes (~54%) within MFT have
been delegated to CEO of Mail.ru Group
(Russia)
Mail.ru shareholder structure
Source: Public data as of June 30, 2019, calculated on fully diluted basis, accounting for DRs sitting in employee benefit trust (non-voting) 51
For further information please contact:
Tatiana Volochkovich
Mail.Ru Group, Director of Investor Relations
Office: +7-495-7250-6357 x 3434
Mobile: +7 905 594 6604
E-mail: [email protected] / [email protected]
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